White House Report Calls Gujarat, Pune And Chennai ‘Ugly Sister Cities’ In China Trade Probe

India’s Gujarat, Pune and Chennai have been named in a recent White House report examining the alleged rerouting of Chinese goods through third countries to access the US market while avoiding higher tariffs.

The report, titled ‘The Great Transshipment Scam: Rise, Scope and Costs’, compares the three Indian industrial hubs with Cincinnati, Dayton and Columbus in the US and refers to them as “ugly sister cities” in the context of competition between overseas and American manufacturing centres.

What Does ‘Ugly Sister Cities’ Mean?

The term ‘sister cities’ is generally used to describe cooperation between cities in different countries. In this report, however, the White House uses the phrase in a contrasting context.

According to the report, industrial centres such as Gujarat, Pune and Chennai manufacture products including pumps and compressors, which compete with similar products made by manufacturers in US cities.

The report links this competition to what it describes as tariff arbitrage — the practice of routing Chinese products through third countries where they may face lower tariffs before entering the US market.

‘Shadow Transshipment Network’ Under Scanner

According to the report, the US imposed higher tariffs on several Chinese products beginning in 2018. It alleges that some Chinese exporters subsequently began routing goods through third countries instead of shipping them directly to the US.

The report says goods may undergo limited processing, repackaging, relabelling or changes to documentation in third countries before being exported to the US.

The White House describes this alleged system as a “shadow transshipment network”, arguing that it can allow products to enter the American market at lower tariff rates.

India Among Countries Identified As Potential Risk

The report places India alongside Canada, Japan, Mexico, South Korea and the European Union among economies identified as potential risks because of their large manufacturing bases, significant trade with China and substantial exports to the US.

The report does not, however, establish that all Indian exports passing through these countries are involved in wrongdoing.

According to estimates cited in the report, around $67 billion worth of goods may have reached the US in 2025 after moving from China through Mexico, India and Vietnam.

Could The Issue Affect Indian Manufacturers?

The report distinguishes between legitimate manufacturing in India and simply routing Chinese goods through the country.

If an Indian company imports components such as steel or motors from China and carries out substantial manufacturing or assembly in India, the resulting product can still qualify as an Indian product under applicable origin rules.

The concern raised by the US is over cases where finished Chinese products are allegedly only stored, relabelled, repackaged or accompanied by misleading documentation before being exported to America.

US To Use AI To Detect Suspicious Shipments

The report says US customs authorities are moving towards greater use of artificial intelligence and data analysis to identify potentially suspicious shipments.

The proposed approach would examine factors such as shipping routes, factory production capacity and company ownership to identify inconsistencies.

‘Made In India’ May Not Be Enough

For Indian exporters, the report could mean greater scrutiny of supply chains and country-of-origin claims.

Companies may increasingly need to maintain clear documentation showing where components were sourced and what manufacturing activity was actually carried out in India.

Indian manufacturers seeking greater access to the US market would therefore need robust and transparent supply-chain records to demonstrate compliance with origin and customs requirements.

India’s Manufacturing Ambitions In Focus

The report comes at a time when India is seeking to position itself as a major alternative manufacturing hub to China.

The White House's focus on transshipment reflects its concern that countries such as India could become channels through which Chinese products enter the US market while avoiding higher tariffs.

For India, the challenge will be to strengthen its position as a genuine manufacturing alternative while ensuring that exporters maintain transparent and verifiable supply chains.